Lower FDI Research Articles

Asymmetric Double Tax Treaties: Relief Method and Tax Sparing for Foreign Direct Investment in Developing Countries

This paper focuses on asymmetric tax treaties and investigates from an empirical perspective the impact of OECD member states’ double tax relief method and of treaty tax-sparing provisions on investments in developing countries, while considering network effects. Our results suggest that having a treaty between the OECD member state and the developing country, which improves the investor's conditions in terms of tax burden, by changing the unilateral tax relief method, increases FDI to the developing country. The positive effect prevails when investigated within investments made through the direct route from residence to source. Results suggest that OECD member states offer tax-sparing provisions mostly to less-developed economies, which already receive very low FDI. Finally, we extend the investigation to an analysis of the impact of residence countries’ tax relief methods on source countries’ domestic tax policy. Our results suggest that developing countries set higher CIT rates when the OECD member state relieves double taxation through the exemption method, as compared to when it offers a foreign tax credit.

Low carbon city and FDI inflows: evidence from China.

Achieving the goals of "carbon peaking" and "carbon neutrality" becomes one of the important elements of the ecological civilization strategy in China. Based on the strong balanced panel data of 281 prefecture-level cities in China from 2006 to 2019, we investigate the impact of Low-carbon city pilot policy (LCCP policy) on FDI inflows by using the multi-period DID model and intermediary model. After that, we discuss the heterogenous impact in terms of both policy tools and geographic locations. Furthermore, we investigate the spillover effects of the LCCP policy on the FDI inflows of surrounding cities using the Spatial Dubin DID model. The results show that (1) the LCCP policy can significantly attract FDI through reducing compliance costs and promoting technological innovation, and the Bacon decomposition and the placebo test show that the estimation error is small and the regression result is relatively stable; (2) command-mandatory tools have negative effects on FDI, while market-oriented tools can effectively attract FDI in pilot cities, but voluntary tools have no significant effect on FDI in pilot cities; (3) the LCCP policy can significantly promote the inflows of FDI in the eastern and western regions, but it does not significantly promote the FDI in central regions; (4) there is a positive spillover effect on FDI inflows to surrounding cities.

German Farmers' Awareness of Lameness in Their Dairy Herds.

Lameness is one of the most challenging problems in the dairy industry. Control is impeded because farmers often underestimate the number of lame cows. The objectives of this study were to assess German farmers' awareness of lameness in their herds and to determine the associations between farmers' awareness and their management practices, farm characteristics as well as with farmers' education, personality traits and attitudes. As a part of a large cross-sectional study, veterinarians visited farms in three structurally different regions of Germany: north (n = 253), east (n = 252), and south (n = 260). The cows (n = 84,998) were scored for locomotion and farmers were asked to estimate the number of cows that were lame or did not walk soundly. The ratio of farmers' estimated prevalence and the veterinarians' observed prevalence (Farmer's Detection Index; FDI) was calculated. The median lameness prevalence assessed by the veterinarians was 23.1, 39.1, and 23.2%, and the median prevalence of lame cows estimated by the farmers was 9.5, 9.5, and 7.1% in the north, east, and south, respectively. On average, farmers were conscious of only 45.3% (north), 24.0% (east), and 30.0% (south) of their lame cows. Farmers managing their herds according to organic principles had a higher FDI than farmers who managed their herds conventionally. Surprisingly, no significant associations between FDI and factors concerning claw health management could be detected. Therefore, increased awareness did not seem to be necessarily linked to improved management. Moreover, the FDI was not significantly associated with farmers' education or herd size. In the south, more extraverted farmers had a lower FDI. Those farmers who totally agreed with the statement, “I am satisfied with my herd's health,” had a lower FDI than farmers who disagreed or were undecided. Moreover, farmers who disagreed or were undecided with the statement, “It affects me to see a cow in pain” had a higher FDI than those farmers who agreed to the statement. The results indicate that poor awareness of lameness was linked to the farmers' attitude and personality. Therefore, new approaches concerning the consultation regarding lameness control, such as the use of Motivational Interviewing, might be useful in the future.

A Disaggregated Analysis of Foreign Direct Investment and Economic Growth in Pakistan: New insights from Tota and Yamamoto Causality

This study endeavors to examine the impact of foreign direct investment at aggregated as well as disaggregated level are estimated for economic growth in Pakistan. The data for the period of 1980-2017 was utilized for the analysis. Foreign direct investment at a disaggregated level, i.e. foreign direct investment in low skill-intensive sectors (FDILS), foreign direct investment in medium skill-intensive sectors (FDIMS), and foreign direct investment in high skill-intensive sectors (FDIHS) has been taken as the core variables of the study. Tota and Yamamoto were used to establishing the relationship among the variables in long and the short run. The long-run results of TY causality indicate that TFDI has a positive impact on economic growth. FDILS have a negative impact while FDIMS and FDIHS have a positive impact on the economic growth of Pakistan. The causality results with aggregate FDI explored that a unidirectional causality exists between TFDI and GDP, and the direction of causality running from GDP to TFDI. The causality results with disaggregate FDI indicate that a bidirectional causality exists between GDP, FDILS, FDIMS, and FDIHS. The study discussed some of the issues related to economic growth and FDI in Pakistan. Suggested some measures boost economic growth having specific consideration on low skill, medium skill, and high skill FDI as it has a significant contribution to economic growth. Recent research studies associations among FDI and economic growth in the context of Pakistan.

Japan’s Foreign Assets and Liabilities

The composition of Japan’s current account balance has changed over time, with an increasing income balance primarily reflecting a growing net foreign asset position and higher corporate saving. A comparison of Japan’s income balance with peer countries highlights: (i) relatively high yields on FDI assets, and (ii) very low FDI liabilities in Japan. Panel estimation is used to derive separate exchange rate elasticities for income credit and debit, with novel accounting that disentangles the mechanical from the economic response to exchange rate fluctuations. Despite the changing composition of Japan’s current account balance, its response to exchange rate movements still operates mostly through the traditional trade channel, with a small but reinforcing contribution from the income balance.

Japan's Foreign Assets and Liabilities: Implications for the External Accounts

The composition of Japan's current account balance has changed over time, with an increasing income balance primarily reflecting a growing net foreign asset position and higher corporate saving. A comparison of Japan's income balance with peer countries highlights: (i) relatively high yields on FDI assets, and (ii) very low FDI liabilities in Japan. Panel estimation is used to derive separate exchange rate elasticities for income credit and debit, with novel accounting that disentangles the mechanical from the economic response to exchange rate fluctuations. Despite the changing composition of Japan's current account balance, its response to exchange rate movements still operates mostly through the traditional trade channel, with a small but reinforcing contribution from the income balance.

Relationship between Trade Openness, Financial Development and Economic Growth of Nepal: Evidence from a Developing Country

Background: Capital investment, financial and technological developments are essential drivers for the economic growth of developing countries like Nepal. These factors, directly and indirectly, contribute to the growth of the country. Technological factors such as FDI and trade allow technology and knowledge transfers to Nepal along with foreign investments, goods and services. The financial sector encourages investors by providing loans that further generates investment in the country. Similarly, the development of human capital further increases labor productivity. Nepal, being a developing country, lacks advanced infrastructure and technology, that are vital for pushing the economic growth in the country.
 Objective: This paper examined the effect of capital, labor, foreign direct investment, financial development and trade on the economic growth of Nepal using the endogenous growth model.
 Methods: The study employedthe ARDLboundstesting approach to test the long-run relationships introducing an error correction model to estimate both short and long-term relationships among the variables.The TY non-granger causality test was used to ensure robustness and check the direction of causality.
 Results: The results showed that gross fixed capital formation, population and financial development were significant and inducedpositive economic growth in the long run at a 1% level of significance whereas, the impact of FDI on economic growth was negative and significant at 1%.
 Conclusions: The study concludes that an increase in gross fixed capital formation, population and broad money supply positively impacts the economic growth of Nepal. However, technological factors such as FDI and trade do not adequately explain the economic growth due to low FDI inflows, political instability, poor infrastructure and import dependency.
 Implications: The study emphasized domestic investment and financial development of the country as they were found to be highly significant in the long run. Also, the human capital of the country should be developed by providing education and training as the population was found to be highly significant. The study also indicated that Nepal should push export as its share in the trade is very less. Moreover, policies such as legal reforms, incentives to foreign investors and infrastructural development to attract FDIs in Nepal should be formulated.

How the Global and Gulf Financial Crises Affected Pakistan: Ten‐year Review0

ABSTRACTWe show that the impact of global financial crisis (GFC) on Pakistan's economy mainly transmitted through Gulf Financial Crisis (GCC). In this regard, we assess the effects of both the global and Gulf financial crises on remittances, workers' emigration, return migration, national savings and foreign investment. Applying Exploratory Data Analysis (EDA) before (2000–07) and after GFC (2008–18), we demonstrate that Pakistan witnessed remarkably low FDI inflows and labour force emigration along with higher return migration rates after the crises. Investment from the UAE and other Gulf countries declined eightfold immediate after the global financial crisis, contributing considerably to the decline of the country's GDP growth during 2008–10. There was significant curtailment in emigration volumes and spurts in return migration after 2012, because of the Gulf oil price crisis. The positive trend in remittances until 2015 seems to be influenced by post‐9/11 anti‐money laundering legislation and depreciation of the rupee.

HIGH FDI FLOWS AND HIGH CENTRAL BANK INDEPENDENCE: A NOTE ON COORDINATED GROWTH IMPACT IN EMERGING COUNTRIES

ABSTRACT Based on the evidence that high central bank independence facilitates fdi driven growth, the objective of this note is to see if the coordination between fdi flows and high cbi environment benefits countries in general or the benefits are conditioned by the size of average fdi flows. We proceed by dividing the sample of 22 emerging countries into four different groups: countries with (1) high fdi flows and high cbi (HFHCBI); (2) high fdi flows and low cbi (HFLCBI); (3) low fdi flows and high cbi (LFHCBI); and (4) low fdi flows and low cbi (LFLCBI). For each of these groups, we examine the strength of the lationship between fdi and growth by Subjecting time series data on gdp and fdi flows to Granger causality tests. The results of these tests provide stark differences between the referred country groups. For the HFHCBI group, fdi and gdp shares a robust bidirectional link. Contrastingly, for the HFLCBI group, the link between fdi flows and gdp is unidirectional and runs only from gdp to fdi flows. For the remaining groups of LFHCBI and LFLCBI, fdi flows and gdp fails to influence each other either in the short run or in the long run. The evidence thus suggests that high cbi environment is effective in producing long run spillover growth only for countries that are capable of attracting above average fdi flows. Keywords Foreign Direct Investment, Economic Growth, Emerging Countries, and Central bank Independence.

Cross-Section of Asset Returns: Emerging Markets and Market Integration

Asset pricing in its essence is a very controversial topic. Despite numerous research papers criticising traditional approaches, such as linear factor models, practitioners as well as academics repeatedly return to the milestone models such as the Capital Asset Pricing Model (CAPM), mainly due to their attractive simplicity. This article focuses on the risk-return relationship by comparing the power of traditional and alternative asset pricing models in explaining the cross-section of asset returns. The focus is on unconditional models, commonly used among investors and equity analysts. This paper is based on the research performed by Estrada in 2004 and it extends his approach by introducing the use of GMM. The results suggest that for Emerging markets' investors should give preference to total risk measures over systematic risk measures. Within the category of systematic risk measures, downside beta proved its superiority to traditional CAPM beta. The results can be attributed to delayed integration process, partially justified by the lower FDI and portfolio investments into Emerging markets.

اثر تدفقات الإستثمار الأجنبی المباشر علی النمو الإقتصادی فی العراق خلال الفترة من (2000- 2014)

الملخص: يهدف هذا البحث إلى التعرف على حالة العراق في مجال جذب وتوظيف تدفقات الاستثمار الأجنبي المباشر التي لها أثر على النمو الاقتصادي بالإضافة إلى تحديد نقاط الضعف والقوة التي تؤثر في جذب الاستثمار الأجنبي المباشر خلال الفترة (2000-2014) ولتحقيق هذا الهدف تم اختبار الفرض القائل – هل يوجد أثر ذات دلالة إحصائية لتدفقات الاستثمار الأجنبي المباشر على النمو الاقتصادي في العراق. وتم تقسيم هذا البحث إلى المبحث الأول (الإطار النظري للبحث) والمبحث الثاني (الجانب التطبيقي) اختبار فرض الدراسة. وقد أظهرت نتائج البحث: تدني تدفقات الاستثمار الأجنبي المباشر في العراق للفترة من 2000-2003 وذلک بسبب الحصار الاقتصادي المفروض على العراق منذ عام 1991 ولغاية 2003 لکنة اخذ بالتزايد بعد عام 2004 بسبب رفع العقوبات الاقتصادية وانفتاح العراق على العالم الخارجي وإصدار قانون الاستثمار لسنة 2006 ألا أن هذه التدفقات مازالت متواضعة وغالبيتها في القطاع النفطي وکانت لها أثر إيجابي على النمو الاقتصادي بالعراق. وتأکدت الدراسة أن هناک علاقة طردية وقوية بين تدفقات الاستثمار الأجنبي المباشر والنمو الاقتصادي في الاقتصاد العراقي. وهذا يوضح مدى أهمية هذه التدفقات على الناتج المحلي الإجمالي. Abstract: This research aims to identify the case of Iraq in the field of attracting and hiring foreign direct investment flows that have an impact on economic growth as well as to identify the strengths and weaknesses that affect in attracting foreign direct investment during the period (2000-2014) In order to achieve this goal has been the hypothesis - testing Is there a statistically significant flows of foreign direct investment on economic growth in Iraq effect. This research was divided into the first section (the theoretical framework of the research) and the second section (practical side) tests impose study. Search results: low FDI inflows in Iraq for the period 2000-2003 due to the economic embargo imposed on Iraq since 1991 and until 2003 but is increasing after 2004 due to the lifting of economic sanctions and the opening up of Iraq to the outside world and the issuance of the Investment Company Act of 2006, however, has shown these flows are still modest and mostly in the oil sector and have had a positive impact on economic growth in Iraq. The study confirmed that there is a positive and strong relationship between foreign direct investment flows and economic growth in the Iraqi economy. This illustrates the importance of these flows on GDP.

World FDI, An Unequal Partnerss and Concentric Circless Design, Part VIII When and Where Capital Scarcity. Studying Africa. Its Regions and Countries

This article continues the previously promised series to focus on FDI & DIA, as unitary fluid substance world owned and this is the 8th one. Since general results of our research made are already growing larger and larger, it will be from now on that such syntheses will be separately published from the articles’ bodies, of course for space limiting reasons. Then, whereas Europe and Asia were found to really form an interesting international ’Eurasian’ capital market place carrying nearly 60% of the world capital stock, then the other continents and regions (predominantly of the Third World) see themselves forced to look in different world directions. Besides, in the aftermath of having studied those seven large Eurasian regions – that turn to nine regions when Asia is viewed as identified with its three regions inside – and here considering other nine great countries left from the formerly studied ‘top - 16’ (i.e. US, UK, Mexico, Brazil, Canada, Japan, Australia, South Africa and New Zealand), less than 10% of world FDI stocks and less than 5% of world DIA stocks are left to be met and approached from now on. Shortly, a low FDI & DIA stocks amount expected to be shared among yet a high number of world countries.

Methodological Background of Post-Soviet Regionalism: The Case of Ukraine

Abstract The transformational 1990s significantly differentiated the regional model of Ukraine, which eventually began to resemble a system of uncontrolled chronic economic decline, as the existing planning and regulatory methods had become redundant, the market-based approaches being not actualized. The methodological vacuum in which Ukraine found itself did not allow regions to solve the existing problems by means of European economic convergence instruments. Despite the fact that more and more theories and concepts appeared in the leading developed countries (regional competitiveness, city- region, beautiful places, creative city, localization, etc.), national science used outdated ideas of planned regulation, inappropriate in market economy. The effect of government policies resembled core measures of the neoliberal model, while maintaining a high degree of administrative centralization. FDI inflow fundamentally altered the regional landscape. The leading position in accumulating the FDI stock belonged to Kyiv, which also produced the largest per capita GDP. In the last five years a revival of innovation activity took place in the Ukrainian regions. Eventually it obtained an undulating character, moving basically along two axes: Lviv-Kviv and Kyiv-Kharkiv. However, low FDI level in the worst performing regions could create an erroneous impression about the positive impact of FDI on regional economy. A region's development trajectory> might also be affected by the mentality of its inhabitants, as well as the media, whose impact can convey either a cohesive or disintegrating character. This was evidenced by the recent events in Ukraine, as well as the "East versus West” confrontation, which resulted in frustration, whereas the lack of tolerance among the population of certain regions provoked the bloodshed. Thus, identification of methodological background of post-Soviet regionalism on the example of Ukraine is an important scientific task, which may explain the essence of regional asymmetries in the post-Soviet states.

Infrastructure as a Determinant of Foreign Direct Investment in India and China

This study examines the role of infrastructure in attracting FDI inflows into India and China. Infrastructure is the main determinant in attracting sizeable amount of FDI. During the late 1990’s FDI inflows headed towards developing nations including China and India. China attracted huge amounts of FDI due to rapid growth in infrastructure. India attracted lower FDI due to slow phase growth in infrastructure. The infrastructure development is not similar in both the countries; similarly, the magnitude of inflow of FDI is different. The present study empirically examines the inflow of FDI in to India and China in relation to the physical infrastructure development during the period 2000 to 2012. Regression analysis is employed to study the causal relationship between the inflow of FDI and the infrastructure. Total Road Length, Total Rail Length, Air Passengers, Internet Users, Mobile Cellular Subscriptions and Electricity Production are highly positively related with FDI; In India, Air Passengers, Internet Users, Mobile Cellular Subscriptions and Electricity Production are highly positively related with FDI. Among the infrastructure variables, heavy FDI investment is attracted by the Energy Sector (Electricity Production) both in China as well as in India.

Examining Newfound Tolerance for International Arbitration in the Developing World: An Illustration of the Nexus between Law and Development

This paper seeks to correlate low FDI inflows in many developing countries and their prejudice against international arbitration. Many developing countries lack the capital needed to finance their many projects. This has impacted heavily upon the ability of these countries to realize their economic goals, highlighting the need for FDI. Foreign investors will often undertake the financing of these projects in return for a share of the proceeds. One condition for providing finance, however, is often the need for a stable investment climate. Sources reveal that one essential feature is a legal system, which is conducive to enforceable and neutral dispute settlement. International arbitration is currently the only viable option. Nonetheless, many developing countries are intolerant of this dispute settlement mechanism. This paper contains five chapters. It identifies the main usage of international arbitration in the South, concluding that it is mainly used to settle investment disputes. It considers why countries dislike arbitration, highlighting that notwithstanding past malice; embracing it will lead them to realize their full commercial potential. It highlights that a legal system or one or more of its components, which is not conducive to international arbitration, has been known to create problems in promoting this dispute settlement mechanism. Thus the paper argues that a country’s legal system must be conducive to international arbitration, if the latter is to be effectively utilized in the developing world. There are many benefits associated with the acceptance of international arbitration. Foremost is the ability to attract greater levels of FDI, which will contribute to the economic development plan of the host country; but the fear of bias has to be displaced if any benefits are to be realized. Thus, this dissertation concludes that, bias against international arbitration can indeed hinder the ability of the South to effectively participate in the global economy.

PEM fuel cell low flow FDI

In this work, a signal-based diagnostic methodology that can isolate PEM fuel cell low anode and cathode flow rates is introduced. The methodology is based on calculating symptoms of the faults, and comparing them versus thresholds that are calibrated a priori of real time operation. The novelty with the methodology is in using cell voltage oscillations, imposed by a small signal oscillation on the cathode output pressure, to isolate cathode flooding. Furthermore, it is shown in this work that the fixed reference cathode stoichiometry commonly used in the literature for isolating cathode starvation is not reliable and results in false alarms, and an adaptive scheme is proposed. It is also shown that a fixed stoichiometry scheme can be used to reliably isolate anode starvation. These measures are then used to design a signal-based diagnostic algorithm to isolate cathode flooding, cathode starvation, and anode starvation in real time. Finally, the robustness of the algorithm to changes in current, pressure, temperature, and humidity operating conditions is examined.

Trends in Italy’s Nonprice Competitiveness

Italy's medium-term economic performance has raised competitiveness concerns as unit labor costs surged, and real export growth fell. But the recent economic upturn, low current account deficit, and robust nominal exports argue for less pessimism. An empirical analysis confirms the standard concerns, but also suggests that residual factors, which partly reflect nonprice economic restructuring, have supported Italy's real exports after 2005 (as in Germany but less so in France or Spain). An investigation of selected structural trends over the past decade offers some substantiation to Italy's restructuring story, including quality upgrading, geographical trade diversification, and outsourcing. But sluggish services, low FDI, and modest technological upgrading indicate limits to Italy's restructuring.

The Interactions between Debt and Currency Crises - Common Causes or Contagion?

In contrast to the well-known twin currency and banking crises the literature has so far neglected a second type of twin crises, the simultaneous occurrence of currency and debt crises. The decision of a government to devalue and/or to default is closely interlinked through the government's intertemporal budget constraint. In our empirical analysis we find some evidence that one-year lagged debt crisis strongly Granger causes currency crisis and two-year lagged currency crisis weakly Granger causes debt crisis. We find strong evidence that debt and currency crises have common fundamental causes. Low reserve over imports ratio, low domestic GDP growth rate, and low FDI over external debt ratio all increase the likelihood of debt and currency crises.

Ukraine Economy and Finance in the Reform Process and the European Partnership: A Focus on Aerospace Industry

In spite of economic stabilization and the growth rate uprise since 2003, Ukraine has received less than EUR 5 billion in foreign direct investment over the last five years (from 2000 to 2004). This is less than other less FDI-attractive countries got, notwithstanding the fact that Ukraine has a steel industry of international significance, great agriculture potential, and an automotive industry which accounts for almost 6% of the value added generated by the industrial sector. The new government of Ukraine has declared the foreign investment flows into Ukraine among its top priorities. Unfair competition as a result of past bad government policies was the reason for the low FDI inflow. The former Ukrainian government promoted private interests of a limited group of businessmen. Unfair privatization sales with a limited access of other investors, as well as violent ownership takeovers, took place. The new government has committed to stop this practice. The role of independent courts will grow in dealing with conflicts, including the revision of unfair privatization sales. The determination to be integrated with the EU represents an ultimate goal. Such a step is expected to facilitate Ukraine's movement towards European standards in all spheres. I also present a brief inside evaluation on the aerospace industry, for both the civil and military sectors, starting from a sketch of the defense industry in 2000. The situation of civil and military aviation in Russia and Ukraine has many points in common and it could not be different after such a prolonged common history in the same military-industrial complex. Ukrainian industrial capacity is more or less completely secluded from international partners and markets. EU and NATO should not miss the opportunity to take into account the human capital and the technology achievement already accumulated by Ukrainian industries, research centres, academies, laboratories. The Ukraine aviation industry has suffered a serious decline over the last 15 years. Only recently new programs and major developments in the sector, which is undergoing a major restructuring, have reopened the perspectives of new projects in both civil and military aviation, as well as in space projects. The components sectors will be affected positively if the developments will be confirmed by concrete international partnerships and investments, first of all with the EU and the United States. Mergers and restructuring of the existent production plants are a real need. As experience shows in Europe and in the global market, no national way or revival of past alliances could help Ukraine to maintain a role in the aerospace sector.

Alice is not missing wonderland the eastward enlargement of the European Union

In this paper I will try to show that the EU enlargement from 2004 is not a good economic move for eight newcomers from Central and Eastern Europe (CEECs). It is unlikely that newcomers will get larger FDI, speed up their economic growth and catch up with richer EU countries, although this was broadly advertised both academically and by the EU "propaganda for happiness." The EU subsidies, intended to offset accession costs, turn out to be useless if not damaging for acceding economies, because they change the structure of incentives. So, instead of being rewarded for accession accession countries are going to be punished twice. Firstly, by lower FDI and a persisting GDP gap. Secondly, by getting subsidies which worsen the situation. CEECs would be better off staying outside the EU and continuing to improve economic freedom and the rule of law. But even after they have acceded, there is still some space for reasonable objectives of the CEECs due to unintended consequences of the socialist enlargement design.